2
May 2024
International Personal
Finance plc
Q1 2024 trading
update
International Personal Finance plc ("IPF" or the "Group") is
helping to build a better world through financial inclusion by
providing affordable credit products and insurance services to
underserved consumers across nine markets.
Highlights
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Strong first quarter performance
underpins our confidence in delivering our financial plan in
2024.
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Customer lending growth of 5%,
excluding Poland, with demand improving as the quarter
progressed.
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Good year-on-year net receivables
growth of 11% (at constant exchange rates), excluding
Poland.
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Robust customer repayment
performance and excellent credit quality supports the Group's plans
for stronger lending growth through the remainder of the
year.
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Excellent progress against our Next
Gen strategy to take advantage of substantial and sustainable
long-term growth opportunities.
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Actions underway to adapt our Polish
home credit business to the recent communication from the Polish
regulator on credit card non-interest rate caps.
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Headroom on undrawn facilities and
non-operational cash balances of £174m, supports our growth plans
for the next 12 months.
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Plans to refinance the Eurobond due
in November 2025 are progressing well.
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Gerard Ryan, Chief Executive Officer
at IPF commented:
"We've made a very good start to the year and are progressing
well against our 2024 financial plan. We delivered good customer
lending and receivables growth in all our markets with the
exception of Poland, where our actions to adapt our home credit
business to the changing regulatory backdrop
continue.
Credit quality remains excellent
across all parts of the Group, and this provides us with a strong
foundation to accelerate growth through the remainder of the year
and capture the substantial long-term growth opportunities through
delivery of our Next Gen strategy.
We
have a very robust balance sheet and funding position to support
our future growth opportunities and we are continuing to engage
with fixed income investors to explore options to refinance the
Group's Eurobond due in November 2025. As a
diversified, global business with a clear strategy to extend
financial inclusion, we are well positioned to deliver further
growth and attractive returns to shareholders in 2024 and
beyond.
I
would like to thank all our colleagues and customer representatives
for their continuing excellent efforts in delivering on our purpose
to build a better world through financial
inclusion."
Group overview
Building on the strong operational
and trading performance in 2023, all three of our divisions made a
good start to the year, delivering a financial performance in line
with our plans as we continue to execute against our Next Gen
strategy.
There continues to be strong demand
for our broadened range of credit products and insurance services.
First quarter customer lending, excluding Poland, showed
year-on-year growth of 5%, with lending in March (and through into
April) showing increased momentum. Closing net receivables,
excluding Poland, grew year on year by 11% (at CER) to £865m.
Lending and receivables in our home credit and digital businesses
in Poland, saw a year-on-year reduction of 21% and 32% respectively
as we continue to adapt and transition the business to meet the
changed requirements of the evolving regulatory landscape. As a
result, overall Group customer lending and closing net receivables
both reduced by 3% year on year. Customer numbers increased by 2%
to 1.7 million, excluding the impact of the transition in Poland
where customer numbers declined by 14%. Our
guidance provided with the 2023 year end results of a £10m
reduction in Group profit per annum remains unchanged, and this has
been factored into market consensus.
As discussed at our recent full-year
results presentation, our financial model underpins our purpose to
build a better world through financial inclusion and we remain
focused on delivering our medium-term targets for revenue yield,
impairment rate and cost-income ratio.
The Group annualised revenue yield strengthened by 1.8ppts to 55.2% year on
year and is very close to our target range. Despite the
increased costs of living being experienced by our customers, our
responsible approach to granting credit together with strong
operational discipline ensured customer repayment performance in
the first quarter of the year was very strong and credit quality
excellent. The Group's annualised impairment rate for the first
quarter of 11.4% (March 2023: 10.5%) is tracking better than our
financial plan and provides a very strong foundation for increasing
lending growth as the year progresses. We continue to maintain a
strict focus on efficiency and cost control, and the Group's
cost-income ratio improved by 0.8ppts year on year to 58.0%. The
ratio is 1ppt higher than at the 2023 year end wholly due to the
reduction in revenue in Poland. We expect the Group ratio to
improve during the year as we deliver increased growth and continue
to execute on our cost efficiency programme.
Divisional performance review
European home credit
Our European home credit division
delivered another good operational performance in the first quarter
of the year, with customer repayment performance being very strong
and ahead of our plans in all four markets.
We continued to see good demand for
affordable financial services in our target consumer segment which
resulted in a 6% increase (at CER) in customer lending in Romania,
Hungary and the Czech Republic combined. Demand for borrowing
increased as the quarter progressed, and this has continued into
April.
In Poland, we saw a reduction of
around 20% (at CER) in lending, as we continue to transition the
business to the evolving regulatory landscape, including the lower
non-interest rate cap on credit cards.
European home credit receivables
ended the first quarter at £440m, a year-on-year reduction of 11%
(at CER). This comprises combined growth of 9% in our Romania,
Hungary and Czech Republic businesses offset by a 33% reduction in
Poland.
Our European home credit business
remains the bedrock of our Group returns and, importantly,
continues to offer good growth opportunities. We remain focused on
executing on the transition of our Polish business and as part of
our cost efficiency programme, we undertook a restructuring of the
field force in our Polish business in the first quarter which has
resulted in an exceptional redundancy cost of £5m.
Mexico home credit
Mexico home credit delivered another
good financial performance in the first quarter of 2024. Customer
lending increased by 4% year on year and closing net receivables
grew by 8% (at CER) to £194m. Our actions to improve performance in
the two underperforming regions of Mexico City and Sureste (c.20%
of the business) are gaining traction, and we expect lending growth
for the year as a whole to increase to our target range of between
8% and 10%. We continue to expand our geographical presence, with
new branch openings later this year in Mexicali in northern Mexico
and a further new branch in Norte.
Customer repayment performance and
write-off volumes improved in the first quarter and the impairment
rate has improved by 1.0ppt since the year end to 31.3% (March
2023: 32.1%). We expect the impairment rate to continue to improve
towards our target level of 30% for the year as a whole.
Mexico home credit represents a
significant growth market for the Group, forming a key part of our
Next Gen strategy, and we are very pleased with its continuing
strong financial performance and momentum.
IPF
Digital
IPF Digital performed well in the
first quarter of the year. Consumer demand for our
digital offering remains robust in all our markets and customer
lending, excluding Poland, increased by 4% against a strong
comparative in 2023. Receivables, excluding Poland, grew by 17% (at
CER) and customer repayment performance and credit quality are very
good in all our markets. Lending growth is showing good traction,
particularly in Mexico, Australia and our Czech Republic business,
and we expect to deliver lending growth for the year as a whole of
around 15% to 20%, excluding Poland.
Our Polish digital business saw a
27% (at CER) year-on-year reduction in both lending and receivables
during the quarter as we adapted the business to the lower
non-interest cap for instalment loans introduced in late 2022 as
well as enhanced affordability regulations introduced in 2023. As
expected, the contraction is now slowing as demonstrated by the
relatively modest £2m reduction in receivables since the year end,
and we expect the book to return to growth as the year
progresses.
IPF Digital's receivables book grew
by 7% (at CER) to £232m in the first quarter. With excellent
portfolio credit quality, this provides a very good foundation for
accelerating growth through the remainder of 2024.
We are strongly focused on
executing our Next Gen growth strategy to rebuild the scale of IPF
Digital and deliver our target returns over the next two
years.
Funding and balance sheet
We maintain a very robust funding
position and a conservatively capitalised balance
sheet. At the end of the first quarter, the
Group had total debt facilities of £630m
comprising £430m of bonds and £200m of bank facilities. Our
borrowings stood at £497m and, together with undrawn facilities and
non-operational cash balances, the Group's headroom on debt
facilities was £174m. This provides sufficient headroom
to support our growth plans through to the second
quarter of 2025.
During the first quarter, we
successfully secured £26m of debt facilities, including £23m of
bank facilities and the issuance of the remaining £3m of retail
bonds held in treasury.
We note the improvement in debt
market conditions and, together with our advisors,
we will continue to explore the range of debt
refinancing options available to the Group as we look to refinance the Eurobond due in November
2025.
Our credit ratings remained
unchanged, with a long-term credit rating of BB- (Outlook Stable)
from Fitch Ratings and Ba3 (Outlook Stable) from Moody's Investors
Services. In April 2024, Moody's completed a periodic review of the
Group's rating and re-affirmed the Ba3 corporate family rating.
Regulatory update
From 1 January 2024, the Polish
financial supervision authority, Komisja
Nadzoru Finansowego (KNF), began
supervising all non-bank financial institutions in Poland,
including our home credit and digital businesses in this
market. As reported in detail with our 2023
full-year results statement, all regulated lenders operating in the
credit card market in Poland received a letter from
the KNF in February 2024
setting out its expectations on non-interest caps for credit cards.
In response, we introduced a new pricing
structure for all new credit cards in March 2024 and we are
continuing to adapt the business in order to ensure it delivers the
Group's target returns of between 15% and 20% whilst building
financial inclusion in this important market. We are also
continuing to engage with the KNF regarding our
application for a full payment institution
licence.
As reported in our 2023 full-year
results statement, new regulation for a price cap on consumer
lending has long been discussed in Romania. The draft law was
accepted by the Parliament, but is now undergoing a review by the
Constitutional Court, which is expected to be concluded in May
2024. We do not expect the impact for the Group to be
material.
Outlook
Our aim is to provide underserved
consumers with access to simple, personal and affordable credit and
insurance services to help support and protect them and their
families. There is strong demand for affordable credit within our
target demographic, and we will continue to implement our Next Gen
strategy by offering more product choices
to consumers within our existing markets as well as expanding our
geographic reach in Mexico.
We have a strong balance sheet and
funding position, and are well positioned
to deliver further good quality customer lending and receivables
growth in 2024 and beyond whilst maintaining our progressive
dividend policy.
Investor and analyst conference call
International Personal Finance plc
will host a conference call for investors and analysts at 08.00hrs
(BST) today, Thursday 2 May 2024.
To participate in the conference
call please use the dial-in or register online using the link
below. Once registered, you will receive an email and calendar
invitation with your online access link.
For
further information, please contact:
International Personal Finance
plc
Rachel Moran (Investor
Relations)
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+44 (0)7760 167637
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Georgia Dunn (Deputy Company
Secretary)
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+44 (0)7584 615230
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A copy of this statement can be
found on our website - www.ipfin.co.uk
Legal Entity Identifier:
213800II1O44IRKUZB59